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1. Feature: The Most Important New-Hire Document (4 min read)

2. From the Archive: How to Get an SBA Loan in 2025—Even With Tougher Rules. Read it here

3. Dear TCoL: A Side-Hustle Epidemic and How to Deal With it

Reset this Sunday and prepare for the week ahead.

-TCoL

Missed our last feature article? Don’t Think For a Minute That C Corporations Are Dead. Read it here

You hire someone. You share your tools and your customers. You give them access to internal data and plans. Over time, they help you grow. One day they leave. And what walks out the door with them might be more valuable than what you pay them to build.

Every employer needs a custom agreement for new hires that protects company information, defines invention ownership, and sets boundaries for what happens after the job ends. Without it, you may not legally own what was created under your roof. You may not be able to stop someone from using your own systems or contacts against you.

This article outlines what that agreement should include. It draws on tested language and covers the essential terms. It is not a document you sign once you suspect a problem. It is part of how smart companies onboard every employee who touches what matters.

Premium subscribers can access a professionally-drafted template based on this article.

Protect What You Know

Start by defining what counts as confidential. Make it clear that confidentiality includes everything not generally known outside the company. That includes financial data, software code, product roadmaps, supplier pricing, business plans, and information entrusted to the company by third parties.

To make it clear that this information must stay protected both during and after employment. Use language like this:

“I agree, at all times during the Relationship and thereafter, not to disclose to any person, firm, company, or other entity any Confidential Information that I obtain, use, access, or create unless the Confidential Information becomes publicly and widely known through no wrongful act of mine.”

This clause does not prevent someone from having conversations about where they worked. It prevents them from taking the materials or knowledge that gave your business its edge.

Block Unauthorized Use of AI

Modern agreements must address growing risks. Employees using generative artificial intelligence tools to test ideas or increase output may do more than that. They may unknowingly expose sensitive company data to outside systems.

To stay protected, include direct language:

“I agree not to input any Company Confidential Information into any generative artificial intelligence or machine learning systems without express written permission from Company.”

That sentence sets a clear rule. It prevents a situation where trade secrets are absorbed into public models and lost for good. No workaround. No appeals.

Own What You Pay to Build

Under U.S. law, an employer may not automatically own what an employee invents while on the job. Without written assignment, the business risks losing control of software, designs, written materials, or processes that were developed during the employment period.

Use language that removes doubt:

“I hereby assign to the Company all my right, title, and interest throughout the world in and to all Company Inventions and all patent, copyright, trademark, trade secret, and other intellectual property rights therein.”

This should apply to inventions made solely or jointly with others during the course of the employee’s work, and related to the company’s business.

Also give the employee a place to disclose any preexisting inventions or external obligations. If they leave that section blank, add this clause:

“To the extent Inventions do exist and are not listed I hereby forever waive all rights and claims of ownership.”

That one sentence closes an open door before it becomes a legal problem.

Clean Exits Matter

A good agreement prepares for the day the relationship ends. It does not need to be adversarial. It just needs to be specific.

Employees should agree to return all company property, both physical and digital. That includes notes, data, drawings, records, and devices. State that these materials remain the property of the company at all times. Reaffirm that any copies must be surrendered as well.

Also require the employee to sign a short Termination Certification that confirms they have returned all company property and that confidentiality obligations will continue after they leave. This final signature helps protect you later if a dispute arises over what they took or what they knew.

Stop Unfair Competition, Not Honest Work

You cannot stop a former employee from making a living. You can stop them from poaching your team or misusing confidential information to win business from your clients.

Your agreement should include a clause that prohibits solicitation of employees and customers for a limited time after termination. A typical window is twelve months.

For team members, consider this language:

“I shall not directly or indirectly solicit, induce, recruit, or encourage any of the Company’s employees or consultants to terminate their relationship with the Company.”

For customers and clients, state that the employee may not use confidential information to interfere with company relationships or redirect business to a competitor.

This does not necessarily act as or replace a noncompete. It simply preserves the company’s legitimate interests and gives you grounds to act if someone crosses the line.

Comply with State Law

If your business operates in multiple states, be aware that some jurisdictions require specific language. California, Washington, and Illinois, among others, have statutes that limit what an employer may claim.

In those states, include a carveout that acknowledges the employee’s right to retain inventions made on personal time without company resources, unless the invention relates to the employer’s business or anticipated development. This adjustment keeps the agreement enforceable and fair.

When and How to Use It

Include the agreement as part of your employment offer packet. Make sure it is signed before the employee begins work.

If someone refuses to sign or pushes back on key clauses, listen carefully. That reaction may reveal future risks you had not considered.

This is not a document to keep in a drawer. It is a living record of your business’s intent to protect what it builds.

Final Word

Not every role needs this level of protection. You may not need it for hourly labor or seasonal support. But if someone will handle sensitive data, contribute to internal systems, or build anything new, then you should take the time to put the right protections in place.

Build your agreement now. Use language that holds up. Review it when someone exits. Make it part of your onboarding process so your IP and your relationships stay yours.

Premium subscribers can receive a complete, professionally drafted multi-state template for this article. Simply Upgrade for $7.95 per month for access to the template and our entire template library.

Dear TCoL: A Side-Hustle Epidemic and How to Deal With it 

Question: Is there any way to help protect my company from employees that are constantly taking on side gigs that I know nothing about but find out about later?

Answer: Yes. Generally, when you hire “At-Will” employees, it always is a good practice to use a written offer letter. When you use an offer letter, you can add what we call, “side hustle” language. A few months ago, we wrote a detailed article, Hiring in a Side Hustle World, which we encourage you to read.

Here is the side-hustle language we like for offer letters:

By using this language, you are not outright banning side hustles (which can create a legal problem is some states) but you are putting the burden on your new employee to be honest during the hiring process and keep you informed once employed.

We hope this helps!

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!